Industry Data Report

Transcription

1 Industry Data Report Finance & Valuations 2019 RR s Finance & Valuation IDR is based on survey responses (equally weighted) from 48 finance companies including traditional cash flow franchise lenders, sale leaseback companies, SBA lenders, equipment finance companies and financial consultants/advisors. Report highlights: (1) 2018 restaurant financing volume of $11.2 billion represents an -11.2% y/y decrease and the second consecutive year of declining volume that was below initial expectations we estimate $15.6 billion in total financing needs for 2018; (2) 2019 origination prospects are expected to come in slightly lower at $11.0 billion; (3) the total financing portfolio outstanding grew +4% to $57 billion in 2018 as franchisors continue selling stores as part of their asset light model; (4) despite more lenders entering the space, LIBOR spreads were unchanged but borrowing rates rose sharply due to an increase in index rates; (5) private EBITDA unit level valuation multiples for large chains declined slightly and are expected to remain under pressure due to unit level margin challenges while the large deal premium compressed sharply; (6) public franchisor EV/EBITDA multiples edged higher relative to private franchisee EBITDA multiples and the public multiple premium is at the top of our historic range (reflecting an asset light model and buyout premiums paid by private equity buyers); and (7) cap rates were unchanged at 6.0% as higher QSR cap rates were off-set by a decline in FSR. Table of Contents Page Financing Restaurant Finance Overview 2 Origination Volume & Portfolio Size 3 Estimated Franchisee Financing Needs 4 Key Rates 5 Equity Requirements 6 Leverage Ratios 7 Loan & Amortization Terms 8 Valuations 2H:18 Valuation Update 9-10 EBITDA Multiples by Chain 11 Factors Impacting Valuations 12 Public Company Valuations Real Estate Cap Rates 15 Franchisor Royalty Securitizations 16 Valuation Methodology 17 Survey Participants & Contact Listing Survey Participants & Roster Changes 18 Key Finance & Valuation Contacts Copyright: This Restaurant Research LLC document is copyrighted material. Due to the No Electronic Theft (NET) Act of 1997, electronic forwarding or other forms of redistribution, without the express permission of Restaurant Research LLC, are violations of law and could be subject to fines of up to $250,000 and up to five years of imprisonment, even when no financial gain or commercial advantage accrues to the forwarder/re-distributor. Copyright 2019 Restaurant Research LLC. All rights reserved.

2 IDR: Finance & Valuations Source: RR Estimates Page 2

3 Origination Volumes & Portfolio Size IDR: Finance & Valuations Source: RR Estimates Page 3

4 IDR: Finance & Valuations Source: RR Estimates Page 4

5 Key Rates IDR: Finance & Valuations Source: RR Estimates Page 5

6 Equity Requirements IDR: Finance & Valuations Source: RR Estimates Page 6

7 Leverage Underwriting Ratios IDR: Finance & Valuations Source: RR Estimates Page 7

8 Loan & Amortization Terms IDR: Finance & Valuations Source: RR Estimates Page 8

9 Estimated Franchisee Unit Level Valuations IDR: Finance & Valuations Source: RR Estimates Page 9

10 IDR: Finance & Valuations Source: RR Estimates Page 10

11 IDR: Finance & Valuations Source: RR Estimates Page 11

12 Availability of Capital Availability of Units for Sale Source: Restaurant Research LLC December 2018 Valuation Survey Summary of Valuation Comments Survey Participant Contact Information Firm Contact Main Number Advanced Restaurant Sales, LLC EPK National Restaurant Appraisal FranBizNetwork Hopkins Appraisal Services, Inc. National Franchise Sales National Restaurant Brokers, Inc. Praetorian Group Trinity Capital LLC IDR: Finance & Valuations Source: RR Estimates Page 12

13 Public Company Valuations (EV/EBITDA) IDR: Finance & Valuations Source: RR Estimates Page 13

14 IDR: Finance & Valuations Source: RR Estimates Page 14

15 Marcus & Millichap Real Estate Cap Rates About the Contributing Firm: Marcus & Millichap which specializes in representing institutional and private companies in the disposition of multi-tenant and single tenant retail properties. For more information, please contact Hank Wolfer of Marcus & Millichap at (206) IDR: Finance & Valuations Source: RR Estimates Page 15

16 Franchisor Royalty Securitizations Source: Guggenheim Securities IDR: Finance & Valuations Source: RR Estimates Page 16

17 Valuation Methodology (1) Business Value is determined by using an appropriate multiple of adjusted EBITDA. Some typical EBITDA adjustments include: (2) Real Estate Value (land and building) is determined by: - Example - Fee Restaurant Property Business Value Real Estate Value Sales Adjusted EBITDAR Implied Rent Adjusted EBITDA Multiple Business Value Implied Rent/Sales Implied Rental Income Cap Rate Real Estate Value Total Value IDR: Finance & Valuations Source: RR Estimates Page 17

18 New Entrants Industry Player Roster Changes Exits IDR: Finance & Valuations Source: RR Estimates Page 18

19 Atlantic Capital Bank Bank of America Bankers One Capital BBVA Compass BciCapital Management BMO Harris Bank Franchise Finance BOK Financial Bridge Funding Group Byline Bank - Small Business Capital Cadence Bank Chase Chemical Bank CIT Bank, N.A. LLC (Mid Cap) Citizens Bank Restaurant Finance City National Bank Customers Commercial Finance Fifth Third Bank First Fidelity Bank First Franchise Capital Corporation First Tennessee Bank Franchise Finance Flagstar Bank Gulf Coast Restaurant and Franchise Finance HSBC Bank USA Huntington National Bank Live Oak Bank M & T Bank Manufacturers Bank Marlin Franchise Finance Group Northern Bank & Trust Pacific Premier Bank Franchise Capital Pinnacle Commercial Capital PNC Franchise Finance Ready Capital Corporation Company Contact Phone # Regions Restaurant Bank Signature Financial Sterling National Bank TCF National Bank Texas Capital Bank Restaurant Research Franchise Finance Contacts Regional Focus Industries Served Real Restaurant C&G Other Retail Estate Equipment Enterprise SBA Sale- Leaseback Finance Companies Type of Financing Development Financing Typical Deal size Min Max Avg Minimum Requirements Yrs. In Business Units Owned

20 Company Contact Phone # Umpqua Bank Vendor Alliance Capital, Inc. Washington Federal Wells Fargo - Restaurant Finance Group Western Alliance Bank Western Equipment Finance Wintrust Franchise Finance Zions First National Bank CapitalSpring Marcus & Millichap Pacific Management Consulting Group Peak Franchise Capital LLC Trinity Capital, LLC Advanced Restaurant Sales EPK National Restaurant Appraisal FranBizNetwork Hopkins Appraisal Services, Inc. National Franchise Sales National Restaurant Brokers, Inc. Praetorian Group Restaurant Research Franchise Finance Contacts Regional Focus Industries Served Restaurant C&G Other Retail Type of Financing Real Estate Equipment Enterprise SBA Sale- Leaseback Private Investment Companies Sale Leaseback Companies Financial Advisors Valuation Experts/Brokers Development Financing Typical Deal size Min Max Avg Minimum Requirements Yrs. In Business Units Owned

21 Visit or contact us at (860) or Ask us about custom research projects Ask to be added to complimentary RR Thermometer distribution list Copyright: This Restaurant Research LLC document is copyrighted material. Copyright 2017 Restaurant Research LLC. All rights reserved. Disclosure: Restaurant Research LLC often sells report subscriptions to concepts under our coverage. Disclaimer of Liability: Although the information in this report has been obtained from sources Restaurant Research LLC believes to be reliable, RR does not guarantee its accuracy. The views expressed herein are subject to change without notice and in no case can be considered as an offer or solicitation with regard to the purchase or sales of any securities. Restaurant Research s analyses and opinions are not a guarantee of the future performance of any company or individual franchisee. RR disclaims all liability for any misstatements or omissions that occur in the publication of this report. In making this report available, no client, advisory, fiduciary or professional relationship is implied or established. This report is intended to provide an overview of the restaurant industry, but cannot be used as a substitute for independent investigations and sound business judgment.